Population Aging Has Created A Challenge For Real Estate

Vietnam’s population structure is on the rise, with a rapidly increasing dependence on the population and a decline in the labor force from 70% to 60%, which poses challenges for the property market.

On 9 January, Savills Vietnam has announced the property market report for Vietnam quarter IV-2016. In general, the market is relatively positive, with good growth as consensus supply increases sharply in all segments.

However, the real estate market is facing challenges ahead of the aging population. According to Pham Van Dai, Head of Savills Research and Consultancy, Vietnam’s population structure is on the move.

In particular, the rapid increase in the dependency ratio and the decline in the labor force from 70% to 60% have created challenges for the real estate market, especially the retail segment.

Savills forecasts that the real estate market will continue to grow in 2017

Therefore, the market must increasingly promote segment diversification to meet the overall demand. Emerging in this trend is e-commerce. Specifically, retail supply in the fourth quarter reached 1.1 million square meters, up 19,000 square meters from a shopping center and five new supermarkets.

However, average rents fell by 1% quarter-on-quarter. In the shopping center, the mental capacity in this type is stable quarterly. Retail sales increased by 3% while department stores decreased by 1%.

In the office segment, Savills said insurance, banking and real estate companies accounted for nearly 50% of office demand. In particular, the consumption mainly comes from the B class, accounting for 96% of total new consumption.

In the fourth quarter, total supply reached over 1.6 million sqm. There is a project from the class C is the Vietnamese music and two class B project is Mapletree Business Center and Saigon Giai Phong.

Savills expects to add 180,000 square meters of floor space this year, expecting to cover the current shortfall. The market remained stable with an average capacity of 97%, up 1% quarter-on-quarter and 2% year-on-year. Average rents increased quarterly by 1% and 3% year on year.

Savills expects to add 180,000 square meters of floor space this year, expecting to cover the current shortfall.

***Update on new information on the real estate law in Vietnam here: Vietnam real estate law

Noticeably, the primary supply in the villa and townhouse segment in Q4 reached 550 units, down 22% qoq. Trading volume in this segment decreased by 18% due to new supply constraints.

According to Savills Vietnam, the real estate market in 2017 will continue to grow and is unlikely to happen bubbles.

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